Last month, I appeared before the federal government’s Standing Committee on Industry, Science and Technology to convey our concerns regarding Bill C-501,An Act to amend the Bankruptcy and Insolvency Act and other Acts (pension protection), which if passed will alter the status of

SCC Docket No. 33797, Leave granted 25 November 2010

Bankruptcy and Insolvency—Companies' Creditors Arrangements Act—Provincial Obligations

On November 25, 2010, the Supreme Court of Canada granted leave to appeal in Her Majesty the Queen in Right of the Province of Newfoundland and Labrador v. Abitibibowater Inc., et al.

In May of 2010, we reported on the decision of the British Columbia Court of Appeal in Ted Leroy Trucking v. Century Services Inc. In that decision, the Court of Appeal upheld a decision of the B.C.

One of the primary objectives of the Bankruptcy and Insolvency Act (“BIA”) is to provide the bankrupt with an opportunity to stay existing creditors and establish a financial “clean slate”. The stay imposed on existing creditors includes creditors with causes of action existing at the time the bankruptcy is initiated. As a result, bankrupts can cause a halt to any existing or potential litigation by assigning themselves into bankruptcy.

In the recent decision of Century Services Inc. v. Canada (Attorney General), 2010 SCC 60, the Supreme Court of Canada has, for the first time, interpreted key provisions of the Companies’ Creditors Arrangement Act (“CCAA”).

The judgment of the Court, which was pronounced December 16, 2010, overrules appellate authority from Ontario and British Columbia that previously conferred a priority for unremitted GST on the Crown in CCAA proceedings, and endorses the broad discretionary power of a CCAA court.

On December 16, 2010, the Supreme Court of Canada ( SCC) released its decision in Re Ted Leroy Trucking Ltd. In its decision, the SCC affirmed the importance of the Companies’ Creditors Arrangement Act (CCAA) as a flexible restructuring tool, and clarified the source and limits of the Court’s authority during CCAA proceedings. Furthermore, the Court overruled the judgment of the B.C.

In our last Financial Services Flash, we emphasized the issue that lenders need to be aware of specific restrictions that may apply to the liquidation of inventory over which they have security. This Flash considers the general notion that a lender needs to be cognizant of some unique and sometimes unexpected liabilities of the borrower which may take priority over such lender’s security. There are, of course, many ‘priority payables’ which are commonly known, whether they relate to unpaid wages, certain sales taxes, pension plan obligations, etc.

In Century Services Inc. v. Canada (Attorney General)1, released just before Christmas 2010, the Supreme Court of Canada overturned the prevailing case law that held that the deemed trust created in favour of the Crown under the Excise Tax Act (ETA) for collected but unremitted amounts of Goods and Services Tax/Harmonized Sales Tax (GST/HST) survived in the context of a Companies' Creditors Arrangement Act (CCAA) reorganization.

Lenders should be aware that a broad definition of “wages” owing to employees of a borrower/customer in bankruptcy or receivership can take priority over what a lender might otherwise believe is its “first ranking charge” against the borrower.

Amendments to the Bankruptcy and Insolvency Act (BIA) and related new legislation came into force in the summer of 2008 which were aimed at significantly enhancing and protecting, among other things, employee related claims against bankrupt or insolvent companies. The amendments included a super priority charge over all assets for some, but not all, pension claims as well as a limited priority charge over certain assets for some wages owing to employees, subject to a cap for each employee.